The Dollar has weakened across the board against major currencies after its monumenmtal rally. The BoE and ECB are expected to keep rates unchanged which may add support fot the Pound and Euro. FRench Unemployment remained unchanged, whilke Italian business confidence jumped on lower oil prices.
[B]Economic Events 09/04/2008[/B]
[I]06:37 GMT[/I][B]Bund futures are sharply lower ahead of today’s ECB meeting.[/B] The central bank is widely expected to keep rates unchanged and stress its focus on inflation, despite weakening growth. As of 6:34 GMT the September 10-year Bund future is down 39 ticks on the day at 114.02. The 10-year cash yield is up 4 bp at 4.18% and the 2-year yield 6 bp at 4.17%. In the money markets the December 3-month Euribor future is down 0.015 at 94.920 and back months futures are down as much as 0.060 in the Jun 09 contract.
[I]06:56 GMT[/I] [B]French Q2 ILO unemployment remained unchanged from Q1 at a revised 7.6%.[/B] Q1 was revised up from 7.5% reported previously. Unemployment has fallen sharply over the past years from the 9.5% in Q1 2006. However, data indicates that unemployment has now bottomed out as the construction sector is stalling and manufacturing is slowing down.
[I] [/I][I]06:58 GMT[/I] [B]FX Action: EUR-USD experienced early volatility[/B], with some U.S. and European accounts covering shorts ahead of today’s ECB meeting. EUR-USD moved up to 1.4528 highs before Eastern European sellers capped further gains. Model fund and Japanese lifers were noted as good EUR-JPY sellers on strength, which also added weight on EUR-USD. Price action is expected to remain choppy today, with the influence of large option strikes and the ECB policy announcement. A large 1.4510 European Digital is due to roll off at 14:00GMT, along with 1.4550 and 1.4565 plain vanilla strikes. The end user will look to keep spot at or below 1.4510 to receive a pay out, while writers of the option are likely to remain steady buyers on dips. Meanwhile, the ECB are expected to leave rates steady at 4.25%, while stressing inflation risk despite evidence of weaker growth. Euro stops above 1.4550-60 held by proprietary names are likely to be vulnerable today, while real money names and momentum funds will remain good sellers on strength.
07:47 GMT- [B]Italian services confidence jumped to 7 from -8 [/B]and retailers confidence improved to 106.5 from a revised 98.5 (98.4) in the previous month. Data are very encouraging and together with an improvement in the August services PMI suggests that confidence is at least stabilizing. However, construction confidence declined in July - to 86.0 from 89.9, indicating that the construction sector continues to struggle under the tightened financing conditions.
[B]Forex Market Highlights[/B]
The Dollar has weakened across the board against major currencies after its monumenmtal rally. The BoE and ECB are expected to keep rates unchanged which may add support fot the Pound and Euro. FRench Unemployment remained unchanged, whilke Italian business confidence jumped on lower oil prices.
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